## Quick Answer

To hire your child legally, you need **four key documents**: (1) a written **employment agreement** outlining job duties, pay rate, and terms; (2) **contemporaneous work logs** showing when work was performed; (3) **payment records** proving you paid for the work; and (4) a **W-2** issued at year end. The IRS specifically requires that records be created when work occurs, not reconstructed later.

## The Four Essential Documents

The IRS doesn't specify exactly which forms to use, but they do require proof that:

- A bona fide employment relationship exists
- Real work was performed
- Fair payment was made for that work

Here's what you need to prove each element:

### 1. Employment Agreement

A written agreement establishes that this is a real employer-employee relationship, not just an allowance with extra steps. Your employment agreement should include:

- Child's name and your name (as employer)
- Job title and description of duties
- Hourly rate or salary
- Expected hours per week
- Start date
- Both parties' signatures

This doesn't need to be a complex legal document. One page is sufficient. The point is to show intentionality. You're treating this like real employment because it is.

### 2. Work Logs (Contemporaneous)

This is where most families fail. The IRS requires **contemporaneous records**: documentation created at the time work is performed, not reconstructed at year end.

| Record Type | Contemporaneous? | Notes |
| --- | --- | --- |
| Server-timestamped digital log | Yes | Best option. Can't be backdated. |
| Daily paper timesheet (signed) | Yes | Good, but requires discipline |
| Spreadsheet updated weekly | Maybe | Editable; no timestamps |
| Year-end summary created in December | No | Not defensible in audit |

For each work session, record:

- Date
- Start and end time
- Tasks performed (specific, not vague)
- Total hours

### 3. Payment Records

You need to prove you actually paid your child for the work. Acceptable payment records include:

- Bank transfers (best: shows in both accounts)
- Cancelled checks or check images
- Venmo/Zelle/PayPal transaction records
- Cash receipts signed by your child (least ideal)

**Avoid cash payments** whenever possible. They leave no automatic paper trail and are harder to prove. See: [Can I Pay My Child in Cash?](/content/answers/pay-child-cash/index.html)

### 4. W-2 at Year End

At the end of each year your child works, you must issue a W-2 reporting their wages. This is true even if:

- They earned below the filing threshold
- No taxes were withheld
- They don't owe any tax

The W-2 is what connects your child's Roth IRA contribution to earned income. Without it, the IRS may question the legitimacy of the contribution.

## Additional Records That Help

While not strictly required, these strengthen your documentation:

- **Job description:** Detailed list of duties for each job role
- **Photos of work:** Evidence that work was actually performed
- **Rate research:** Evidence that pay rates are reasonable for the area
- **Pay schedule:** Regular, consistent payments (not random amounts)

## What You DON'T Need

Some families think they need more than they do:

- **Full payroll software:** Not required for most families hiring kids
- **EIN:** Sole proprietors paying children under 18 don't need one just for this
- **Quarterly tax filings:** Often not required if FICA exempt
- **Lawyer-drafted contracts:** A simple agreement is sufficient

## Bottom Line

Good documentation protects you in an audit and legitimizes your child's earned income for Roth IRA contributions. The key is consistency: create records as work happens, not after the fact.

Need help staying organized? [employkids](/content/site-root.html) generates all these documents automatically: employment agreements, timestamped work logs, payment records, and W-2 worksheets for year end.

## Sources

- [IRS Publication 929](https://www.irs.gov/publications/p929): Tax Rules for Children and Dependents
- [IRS Family Employees](https://www.irs.gov/businesses/small-businesses-self-employed/family-employees): Rules for hiring family members
- [IRS Recordkeeping](https://www.irs.gov/businesses/small-businesses-self-employed/recordkeeping): What records to keep